What to do when no Admiral shares? Expense Ratio (Total World)

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spdoublebass
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What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Thu Feb 22, 2018 5:40 pm

I've read the past posts about ETF's vs Mutual Funds in the forum. I understand that the cost is not that significant to have Investor shares until you reach the 10K needed for Admiral Shares. My question is if there is no admiral shares yet, is the cost still minuscule?

I have VT (ETF Total World) and like the .11%.10% ER. However, the more I learn about myself, I think the investor share class might be more to my liking.
My reasons are:
1. Because of my work and how I get paid, I buy often. It would be real simple to have the mutual fund.
2. When I do buy, I would usually be happy with the price at 4pm, but throughout the day it can be frustrating to buy, then see it go down later. (Also it can be positive when you buy and then it goes up.

VTWSX (Total world) is .21%.19% ER and the ETF class is .11% .10%. While it is more expensive, I'm thinking .21% .19% is still overall "low cost". Am I wrong?

My follow up question is can you have both the mutual fund AND the ETF in the same account? From what I've read you can, but I wanted to double check. If for some reason the ETF dips real low, I'd like to be able to buy it.

Thanks in advance. I didn't want to do anything before I got some feedback.

* Edited to update todays changes in ER's for this fund.
Last edited by spdoublebass on Thu Feb 22, 2018 6:27 pm, edited 1 time in total.
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chevca
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by chevca » Thu Feb 22, 2018 5:53 pm

Yes, a .21 ER is still low in the investing world.

If ER is the main concern, you could likely do better than either with a TSM or S&P 500 fund and Total International combo. Are those available to you?

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by tarmangani » Thu Feb 22, 2018 5:57 pm

Yes you can have both a mutual fund and an ETF. I have VXUS (ETF) and VTIAX (admiral MF) in the same account, as I started investing with ETFs. I too prefer MFs, so I personally would pay a higher rate for the luxury of using them (fortunately I don't have that problem).

The difference in expense is slight. When you have major assets, maybe that becomes a meaningful amount of money, but otherwise it won't matter much. You can fiddle around with a calculator here to put some numbers to it,

https://www.begintoinvest.com/expense-ratio-calculator/

I'd also second chevca's question. If you're concerned about ERs, you have lower cost options available.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Thu Feb 22, 2018 6:02 pm

I know I can split up Total World and I am happy with this fund over separating it. I've already made that decision.

I was more wondering what is high for ER's. I hear "any low cost" fund often, but never really thought about what that exactly means so I was curious.

Thank you for the reply's.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by CppCoder » Thu Feb 22, 2018 6:06 pm

10 basis points is 10 basis points. It's $1 extra for every $1000 invested. Only you can decide if that fee is worth it to you. Some argue one should never pay a penny more than necessary. Others argue it's fine to pay more as long as you do so consciously knowing what you are getting for your dollars. Personally, I prefer mutual funds to ETFs and would pay the convenience fee.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Thu Feb 22, 2018 6:14 pm

Please, excuse my thinking on the spot here, but I had an idea. (Cue horror music)

I just read it's possible to convert from a Mutual Fund to its ETF version for free. Please note I'm only dealing with my ROTH IRA in this instance.

Wouldn't it be possible to just keep say $5000 ($2000 over the minimum) in the mutual fund, then a few times a year (or even once a year) convert what i've put over the $5000 to the ETF class to get the lower ER?

This way I could get the convenience of the mutual fund, but still have the bulk invested with the ETF ER.

The only down side to the ETF that I don't like it the delay when reinvesting dividends.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by sport » Thu Feb 22, 2018 7:20 pm

With the new expense ratios, the difference is .09%. If you are fortunate enough to have $100,000 in the account, the difference in the expenses is $90 per year. Keep in mind that the fund share price will vary more than that each day. It is really not very significant.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by goingup » Thu Feb 22, 2018 7:31 pm

spdoublebass-
If you find mutual funds easier, use them. The difference between .19ER and .10ER on a $5,000 account is small.

Here's the math:
$5,000 X .19% = $9.50
$5,000 X .10% = $5.00

I set up our accounts to have automatic quarterly purchases of several funds and don't worry about purchase price. We're accumulating. :D
Also, it may be possible to convert part of shares to ETFs, but I haven't done that. The minimum for investor shares of VTWSX is $3,000.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by hellobogle » Thu Feb 22, 2018 8:12 pm

This may be a case of taking the Boglehead mantra of “keep costs low” to the extremes. I currently do something similar with VFSVX and VSS (FTSE All-World Ex-US Small) for the same reason - there’s no admiral shareclass. I make sure to keep $3,000 in the mutual fund and transfer the remainder every so often into the ETF. From what I understand, the mutual fund balance can drop below $3,000 due to market conditions but not due to sales, although I’m not sure how strict they are in enforcing this rule.

To be honest, I don’t know that I would recommend this route. It is not exactly a simple transaction. You input a dollar amount of the mutual fund that you want to sell. It has to settle into your settlement fund. While you wait for it to settle, the price may change. Then you have to buy whole shares of the ETF which has a bid-ask spread in addition to the ER. The price is never exactly the same as what you put into the settlement fund, so you end up with money left in the settlement account. I guess in all reality you could use this to buy more of the mutual fund (is that against the rules? Maybe that’s why I haven’t done it). I currently have an annoying $0.01 in my settlement fund that I cannot get rid of no matter how hard I try.

In reality, once you factor in the following, it might be counterproductive:
1. Potential change in value from time of sale of mutual fund to time of purchase of ETF.
2. Bid-Ask spread when purchasing the ETF
3. Potential bit of money left over in the settlement fund

We’re most likely really talking about single dollars here. The ones you gain through the lower ER could be lost several places along the way. That said, if you’re one who itches to tinker, this is a pretty harmless way to tinker without any crazy overhauls.

With regards to your situation, if you’re willing to perform the transaction of described above (from mutual fund to ETF) a couple of times a year, then I don’t see why you wouldn’t be willing to use two separate mutual funds of Total Stock Admiral and Total World Admiral and rebalance a few times a year.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by friar1610 » Thu Feb 22, 2018 10:55 pm

spdoublebass wrote:
Thu Feb 22, 2018 6:14 pm
Please, excuse my thinking on the spot here, but I had an idea. (Cue horror music)

I just read it's possible to convert from a Mutual Fund to its ETF version for free. Please note I'm only dealing with my ROTH IRA in this instance.

Wouldn't it be possible to just keep say $5000 ($2000 over the minimum) in the mutual fund, then a few times a year (or even once a year) convert what i've put over the $5000 to the ETF class to get the lower ER?

This way I could get the convenience of the mutual fund, but still have the bulk invested with the ETF ER.

The only down side to the ETF that I don't like it the delay when reinvesting dividends.
As I was reading your thread that's what I was gonna suggest. But I would only do the MF to ETF conversion once a year. The difference between that and several times a year will be a pittance. (Just remember that you cannot convert back fro ETF to MF.)
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Thu Feb 22, 2018 11:18 pm

friar1610 wrote:
Thu Feb 22, 2018 10:55 pm

As I was reading your thread that's what I was gonna suggest. But I would only do the MF to ETF conversion once a year. The difference between that and several times a year will be a pittance. (Just remember that you cannot convert back fro ETF to MF.)
Just to be clear, when you say I cannot convert back from ETF to Mutual fund, you mean As an exchange right? I could still Sell the ETF's, then just buy more of the mutual fund couldn't I?
(I"m not saying I would have a need to do this, just trying to understand what you mean)

Also, when you convert from ETF to Mutual Fund is there an option online with Vanguard? I was looking online, I can't find it. The only thing I think I can find is to sell the ETF's then buy the mutual fund. Maybe I'm missing something.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by gostars » Fri Feb 23, 2018 2:18 am

If you hold Vanguard mutual funds, you can call Vanguard and ask them to convert those to ETFs, which is considered a non-taxable conversion. The only way to go back to a mutual fund is to sell the ETF then buy the mutual fund, which results in having to pay taxes on any capital gains if it happens in a taxable account. In an IRA it doesn't really matter, and your cost is your time and whatever happens in the market between when you sell the ETF and buy the MF.

It seems like you're looking for ways to create a headache here. Messing around with conversions and selling and rebuying costs more in your time than you're going to save in fees. I don't think the fees really matter that much to you since you'd be sticking with VTSAX and VTIAX if they did. Since you want total world, just buy VTWSX and move on with your day. One day, Vanguard will create an Admiral shares class, and you'll get switched over.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by lazyday » Fri Feb 23, 2018 4:12 am

Holding both traditional mutual fund and ETF shares, doing multiple conversions to ETF shares, and someday needing to sell ETF shares to buy Admiral shares... all that sounds worse to me than just owning Admiral shares of both Total (US) Stock and Total International. Looks like you'd get a .075% expense ratio too.

You could do 50/50, or check this page to estimate the market weight. Recently US was 50.67%.
https://www.ishares.com/us/products/239 ... f#holdings
Scroll down a bit or search for Geography

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by AntsOnTheMarch » Fri Feb 23, 2018 4:37 am

I don’t like dealing with ETFs and much prefer mutual funds. I am also cheap in the sense that a dollar spent makes little sense to me unless it returns value. Only you can determine for yourself if owning one fund with a slightly higher (but still very acceptable) expense ratio is worth value in terms simplicity or whatever.

The argument that the fund price fluctuation can be more per day than a yearly fee is not a valid argument in my opinion. First of all, it can fluctuate in a direction which is to your advantage but a fee will always be to your disadvantage. Second, owning a mutual fund or ETF by its very nature is a proposition that puts your share price at a risk of changing. We accept the downside changes in the hope that the upside changes will be in our favor in the longterm. By contrast, paying extra fees will never be in our favor. So we only pay them for some other real or perceived value in return—just as someone may determine that an adviser fee is worth it to them. For my needs, I seen no real value in paying a higher fee so I only buy funds in which I can own admiral shares.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by Cycle » Fri Feb 23, 2018 4:44 am

I calculate my total fees for the year, $630. 8.5k if with 1% advisor. I split up total world into VTIAX and s&p, but the .1 vs .2 is pretty trivial... Nonetheless I still take advantage of the lower ratio with VTIAX.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Fri Feb 23, 2018 9:45 am

Thank you all for the responses.

I am aware of the arguments about splitting Total World up. I do like the simplicity of the one fund. That simplicity comes at a cost and I was just making sure it fell into the realm of low cost.

It is a valid point though that if I were to complicate things with conversions, then why not split them up. I brought that up more to learn what was possible.

To be honest, my portfolio is not a large dollar amount, so at this point the ER's do not add up to much. Over this past year, I have been realizing that I prefer Mutual Funds and just wondering how to switch to them.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by friar1610 » Fri Feb 23, 2018 10:25 am

spdoublebass wrote:
Thu Feb 22, 2018 11:18 pm
friar1610 wrote:
Thu Feb 22, 2018 10:55 pm

As I was reading your thread that's what I was gonna suggest. But I would only do the MF to ETF conversion once a year. The difference between that and several times a year will be a pittance. (Just remember that you cannot convert back fro ETF to MF.)
Just to be clear, when you say I cannot convert back from ETF to Mutual fund, you mean As an exchange right? I could still Sell the ETF's, then just buy more of the mutual fund couldn't I?
(I"m not saying I would have a need to do this, just trying to understand what you mean)

Also, when you convert from ETF to Mutual Fund is there an option online with Vanguard? I was looking online, I can't find it. The only thing I think I can find is to sell the ETF's then buy the mutual fund. Maybe I'm missing something.

Yes, I mean you cannot convert back from ETF to MF as a non-taxable transaction. You could sell the ETFs (possibly incurring capital gains) and buy corresponding MF shares. I don't know whether or not you can do the MF to ETF transactions on-line. I have only done so over the phone and then only in connection with charitable donations where it was easier for the charity to receive ETF shares than MF shares.

Just as an observation, I think you're making this all harder than it needs to be.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by spdoublebass » Fri Feb 23, 2018 10:44 am

friar1610 wrote:
Fri Feb 23, 2018 10:25 am

Just as an observation, I think you're making this all harder than it needs to be.
I totally Agree. I will not be converting anything. I'm fine with the mutual fund. I was just curious how things work. This thread though kind of got sidetracked on me.

Thanks for the above information.
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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by ruralavalon » Fri Feb 23, 2018 10:53 am

spdoublebass wrote:
Thu Feb 22, 2018 5:40 pm
I've read the past posts about ETF's vs Mutual Funds in the forum. I understand that the cost is not that significant to have Investor shares until you reach the 10K needed for Admiral Shares. My question is if there is no admiral shares yet, is the cost still minuscule?

I have VT (ETF Total World) and like the .11%.10% ER. However, the more I learn about myself, I think the investor share class might be more to my liking.
My reasons are:
1. Because of my work and how I get paid, I buy often. It would be real simple to have the mutual fund.
2. When I do buy, I would usually be happy with the price at 4pm, but throughout the day it can be frustrating to buy, then see it go down later. (Also it can be positive when you buy and then it goes up.

VTWSX (Total world) is .21%.19% ER and the ETF class is .11% .10%. While it is more expensive, I'm thinking .21% .19% is still overall "low cost". Am I wrong?

My follow up question is can you have both the mutual fund AND the ETF in the same account? From what I've read you can, but I wanted to double check. If for some reason the ETF dips real low, I'd like to be able to buy it.

Thanks in advance. I didn't want to do anything before I got some feedback.

* Edited to update todays changes in ER's for this fund.
An expense ratio of 0.19% is low, the absence of very low expense Admiral Shares would not deter me from using the mutual fund rather than the ETF.

I agree that trading mechanics for mutual funds are easier, especially when you are buying every pay period.

Yes you can own both the mutual fund and the ETF in the same account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by flamesabers » Fri Feb 23, 2018 10:57 am

spdoublebass wrote:
Fri Feb 23, 2018 9:45 am
I am aware of the arguments about splitting Total World up. I do like the simplicity of the one fund. That simplicity comes at a cost and I was just making sure it fell into the realm of low cost.

It is a valid point though that if I were to complicate things with conversions, then why not split them up. I brought that up more to learn what was possible.

To be honest, my portfolio is not a large dollar amount, so at this point the ER's do not add up to much. Over this past year, I have been realizing that I prefer Mutual Funds and just wondering how to switch to them.
I don't think an ER of 0.19% is unreasonable. I think one way to gauge your tolerance for an ER is to ask yourself whether you be willing to go through the work of switching over to a different broker if the broker offered a lower ER for the same kind of fund.

This thread about cost savings vs. simplicity reminds me of the decision of going with the 3-fund portfolio vs. a target retirement fund. I think both styles have their own merits. I'm someone who prefers individual funds, but I can certainly understand the rationale for simplicity.

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Re: What to do when no Admiral shares? Expense Ratio (Total World)

Post by jhfenton » Sat Feb 24, 2018 10:34 am

spdoublebass wrote:
Thu Feb 22, 2018 6:14 pm
Wouldn't it be possible to just keep say $5000 ($2000 over the minimum) in the mutual fund, then a few times a year (or even once a year) convert what i've put over the $5000 to the ETF class to get the lower ER?

This way I could get the convenience of the mutual fund, but still have the bulk invested with the ETF ER.

The only down side to the ETF that I don't like it the delay when reinvesting dividends.
This is what I do with VSS/VFSVX (Vanguard FTSE All-World ex-US Small Cap), for which there are no Admiral Shares. I buy VFSVX and periodically convert all but about $1,000 into VSS. Rinse and repeat. There's no need to keep $5,000 in the Investor Shares. (Beyond the difference in expense ratio, the ETF shares usually trade at a premium to NAV, so you pay a lower price for the ETF buying mutual fund shares and converting at NAV.)

I usually don't reinvest my ETF dividends, particularly VSS, because the price I have received on dividend reinvestments in VSS is poor.
gostars wrote:
Fri Feb 23, 2018 2:18 am
It seems like you're looking for ways to create a headache here. Messing around with conversions and selling and rebuying costs more in your time than you're going to save in fees. I don't think the fees really matter that much to you since you'd be sticking with VTSAX and VTIAX if they did. Since you want total world, just buy VTWSX and move on with your day. One day, Vanguard will create an Admiral shares class, and you'll get switched over.
+1 I jump through the hoops with VSS/VFSVX because it is our largest position. The 12 bp difference in expense ratios (25 bp vs 13 bp) is about $250 per year. (Plus, there are often arbitrage opportunities between the ETF and Investor Shares.) It is also a unique fund.

But Total World doesn't offer anything unique except convenience. And that convenience is comprised by the lack of Admiral Shares. If I wanted maximum convenience and lowest cost, I'd split 50/50 between Total Stock Market and Total International Admiral Shares and rebalance once a year and with new money.

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